Business, 06.03.2020 18:40 ghadeeraljelawy

Consider the following table. Quantity Total Private Benefit Total External Damage Total Private Cost 1 12 2 2 20 4 10 3 24 6 11 4 26 12 5 28 10 13 First column: output of an activity undertaken by person 1. Second column: total benefit for person 1. Third column total damage to person 2. Fourth column: total private cost to person 1. (i) What is the optimal choice for person 1 if he does not take into account the damage to person 2? (ii What is the socially optimal choice that sums the welfare of the two individuals? (iii) Assume now that person 1 is liable for the damages caused to person 2. What would person 1 choose now? (iv) What does the Coase theorem say about the case in which player 1 is not liable for damages? Specifically, how does output compare to part (iii)? (v) Does your answer to part (iv) imply that person 2 is worse, or better off (or just as well off) when player 1 is not liable for damages than when he is liable?

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Consider the following table. Quantity Total Private Benefit Total External Damage Total Private Cos...

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